SEC Lawyers Defend Independent Chairman Rule

Securities and Exchange Commission attorneys recently filed a legal brief arguing that that SEC's pending requirement that mutual funds be chaired by independent chairmen is an appropriate action.

The U.S. Court of Appeals for the D.C. Circuit ruled in favor of a lawsuit by the U.S. Chamber of Commerce in June that the SEC hadn't fully considered costs and alternatives. Eight days later, the SEC responded by saying that the alternative was not feasible since the original plan required minimal costs, and it once again voted in favor of the rule. That sparked a second challenge from the chamber and put the rule on hold.

SEC lawyers are now arguing that the SEC offered a detailed analysis of the likely costs of the rules and gave in-depth thought to an alternative. "In fact, the promptness of the Commission's response was laudable" as it benefits investors, fund managers and fund boards, the SEC brief maintained. The SEC said it didn't need to acquire further comment because it had previously found that the rule would not be an expensive endeavor.

The SEC lawyers also argue that the high costs of the rule cannot be sufficient grounds for the Chamber's stance, and further, that in the recent Seventh Circuit Court decision in the case of DHZ vs. SEC, evidence of "concrete" injury must be provided and that the Chamber hasn't provided any such evidence.